US imposes export controls on China’s biggest chip maker SMIC, escalating tensions

The Financial Times reports that US has made good on their treats impose export controls on SMIC (Semiconductor Manufacturing International Corp), China’s largest chipmaker, meaning US companies will need a license to export items to them.

According to US Commerce Department, there is an “unacceptable risk” that the goods could be used for military purposes. SMIC for their part denied making any parts specifically for military use and denies any relation with the Chinese armed forces.

Around 50% of SMIC’s equipment comes from USA, and disruption of their supply chain may affect its production in CMOS sensors, fingerprint sensor ICs, and power management ICs.

The current controls are not as severe as those imposed in Huawei, who was added to the entities list.

“The military end-use rules only apply to a subset of listed U.S. origin items. The Entity List rules apply to all U.S. origin and some foreign-origin items,” said Kevin Wolf, an export control lawyer at Akin Gump and senior Commerce Department official in the Obama administration.

This may, however, be included in further measures.

Chinese Foreign Ministry spokesman Zhao Lijian accused the U.S. of “blatant bullying.”

“What it has done has violated international trade rules, undermined global industrial supply and value chains and will inevitably hurt U.S. national interests and its own image,” Zhao told a news briefing in Beijing. “We urge the U.S. to stop over-stretching the concept of national security to oppress foreign companies.”

The end goal of USA’s strategy is unclear, as diversification of Chinese industry away from US sources will ultimately hurt US companies, damage the US trade balance with China, and reduce US’s influence on China, with no clear gain in sight.

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